REG - Rockhopper Exp plc - Half-year results <Origin Href="QuoteRef">RKH.L</Origin> - Part 2
14/09/2016 07:06
- Part 2: For the preceding part double click ID:nRSN7598Ja
$'000 $'000
Revenue - 2,901 - 2,901
Cost of sales - (3,533) - (3,533)
Gross loss - (632) - (632)
Exploration and evaluation expenses (7) (1,013) (617) (1,637)
Administrative expenses (699) (1,047) (3,132) (4,878)
Excess of fair value over cost 138,842 - - 138,842
Charge for share based payments - - (971) (971)
Foreign exchange movement 4,668 117 (786) 3,999
Results from operating activities and other income 142,804 (2,575) (5,506) 134,723
Finance income 1 - 80 81
Finance expense (3,340) (209) (4) (3,553)
Loss before tax 139,465 (2,784) (5,430) 131,251
Tax - - - -
Profit/(loss) for period 139,465 (2,784) (5,430) 131,251
Reporting segments assets 461,202 34,540 98,270 594,012
Reporting segments liabilities 85,211 22,849 25,956 134,016
Six months ended 30 June 2015
Falkland Greater
Islands Mediterranean Corporate Total
$'000 $'000 $'000 $'000
Revenue - 1,762 - 1,762
Cost of sales - (1,807) - (1,807)
Gross loss - (45) - (45)
Exploration and evaluation expenses (303) (296) (20) (619)
Administrative expenses (20) (1,309) (2,768) (4,097)
Charge for share based payments - - (908) (908)
Foreign exchange movement (774) 249 864 339
Results from operating activities (1,097) (1,401) (2,832) (5,330)
Finance income - - 472 472
Finance expense - (202) (3) (205)
Loss before tax (1,097) (1,603) (2,363) (5,063)
Tax 47,250 - - 47,250
Profit/(loss) for period 46,153 (1,603) (2,363) 42,187
Reporting segments assets 218,631 57,296 159,470 435,397
Reporting segments liabilities 93,100 23,282 24,630 141,012
3 Taxation
Six months Six months Year
ended ended Ended
30 June 30 June 31 December
2016 2015 2015
$'000 $'000 $'000
Current tax:
Overseas tax - - 9
Adjustment in respect of prior periods - (47,250) (55,405)
Total current tax - (47,250) (55,396)
Deferred tax:
Overseas tax - - 1
Total deferred tax - - 1
Tax on ordinary activities - (47,250) (55,395)
On the 8 April 2015 the Group agreed binding documentation ("Tax Settlement
Deed") with the Falkland Island Government ("FIG") in relation to the tax
arising from the Group's farm out to Premier Oil plc ("Premier"). As such the
Group is able to defer this tax liability under Extra Statutory Concession 16.
As it is deferred, the liability has been reclassified as non-current and
discounted. The adjustment in respect of prior years is mainly due to the
impact of this discounting. Additional information is given in Note 6 Tax
payable.
4 Basic and diluted loss per share
Six months Six months Year
ended ended Ended
30 June 30 June 31 December
2016 2015 2015
Number Number Number
Shares in issue brought forward 296,579,834 292,805,453 292,805,453
Shares issued
- Issued in relation to acquisitions 159,684,668 - -
- Issued in relation to share options - 3,532,920 3,532,920
- Issued under the SIP 278,697 149,535 241,461
Shares in issue carried forward 456,543,199 296,487,908 296,579,834
Weighted average number of Ordinary Shares for the purposes of basic earnings per share 438,564,580 293,244,292 293,442,707
Effects of dilutive potential Ordinary shares
Contingently issuable shares - prior periods anti-dilutive 790,813 3,606,543 321,330
439,355,393 296,850,835 293,764,037
$'000 $'000 $'000
Net profit after tax for purposes of basic and diluted earnings per share 131,251 42,187 10,698
Earnings per share - cents
Basic 29.93 14.39 3.65
Diluted 29.87 14.21 3.64
At the period end the group had the following unexercised options and share
appreciation rights in issue.
Six months Six months Year
ended ended Ended
30 June 30 June 31 December
2016 2015 2015
Number Number Number
Long term incentive plan 18,222,590 9,319,704 9,319,704
Share appreciation rights 1,420,531 1,420,531 1,420,531
5 Intangible exploration and evaluation assets
Additions during the period predominantly relate to the fair value of
intangible assets acquired as part of the acquisition of Falklands Oil & Gas.
Additional details are disclosed in Note 9. The majority of the remainder of
the movement relates to the group's interests in the Falkland Islands.
6 Tax payable
Six months ended Six months ended Year ended
30 June 30 June 31 December
2016 2015 2015
$'000 $'000 $'000
Current tax payable 9 - 9
Non current tax payable 46,075 53,963 47,405
46,084 53,963 47,414
On the 8 April 2015 the group agreed binding documentation ("Tax Settlement
Deed") with the Falkland Island Government ("FIG") in relation to the tax
arising from the group's farm out to Premier Oil plc ("Premier").
The Tax Settlement Deed confirms the quantum and deferment of the outstanding
tax liability and is made under Extra Statutory Concession 16.
As a result of the Tax Settlement Deed the outstanding tax liability was
confirmed at £64.4 million and payable on the first royalty payment date on
Sea Lion. Currently the first royalty payment date anticipated to occur within
six months of first oil production which itself is estimated to occur in late
2020 (assuming Sea Lion project sanction in mid-2017). As such the tax
liability has been reclassified as non-current and discounted at 15%. The
effect of this discounting was a tax credit in the prior year of $55.4
million.
Movements in the current period are a foreign exchange gain of $4.7 million
offset by an increase of $3.3million due to the unwinding of the
aforementioned discounting.
The tax liability may be revised downward if the Falkland Islands'
Commissioner of Taxation is satisfied that either (i) the Exploration Carry
from Premier is utilised to fund exploration activities or (ii) any element of
the Development Carry from Premier becomes "irrecoverable". Whilst the benefit
of some of the Exploration Carry has been received from Premier during the
current campaign, this has not resulted in an adjustment in the tax liability
as this is still subject to agreement with the Falkland Islands' Commissioner
of Taxation.
7 Reserves
Set out below is a description of each of the reserves of the group:
Share premium Amount subscribed for share capital in excess of its nominal value.
Share based remuneration The share incentive plan reserve captures the equity related element of the expenses recognised for the issue of options, comprising the cumulative charge to the income statement for IFRS2 charges for share based payments less amounts released to retained
earnings upon the exercise of options.
Own shares held in trust Shares held by the SIP trust represent the issue value of shares held on behalf of participants by Capita IRG Trustees Limited, the trustee of the SIP.
Merger reserve The difference between the nominal value and fair value of shares issued on acquisition of subsidiaries.
Foreign currency translation reserve Exchange differences arising on consolidating the assets and liabilities of the group's subsidiaries are classified as equity and transferred to the group's translation reserve.
Special reserve The reserve is non distributable and was created following cancellation of the share premium account on 4 July 2013. It can be used to reduce the amount of losses incurred by the parent company or distributed or used to acquire the share capital of the
company subject to settling all contingent and actual liabilities as at 4 July 2013. Should not all of the contingent and actual liabilities be settled, prior to distribution the parent company must either gain permission from the actual or contingent
creditors for distribution or set aside in escrow an amount equal to the unsettled actual or contingent liability.
Retained losses Cumulative net gains and losses recognised in the financial statements.
8 Ocean Rig arbitration
The contract with Ocean Rig, which covered both the North Falkland Basin and
South Falkland Basin drilling program, was terminated in February 2016 due to
significant operational issues with the rig. Ocean Rig is claiming termination
fees of up to $62.9 million. The operators refute these claims, and are
preparing counter-claims against Ocean Rig. Rockhopper's interest in the
claims is limited to those relating to the original North Falkland Basin
program. A formal arbitration process has commenced with a decision not
expected until the second half of 2017. Given that the arbitration process has
commenced only recently and the claims and counter-claims of the parties are
not fully quantified or substantiated, it is not appropriate to recognise (or
make provision for) any assets or liabilities in the Company's financial
statements.
9 Acquisition of subsidiary
Acquisition of Falkland Oil and Gas Limited
In January 2016 Rockhopper completed the acquisition of the entire issued
share capital of Falkland Oil and Gas Limited ("FOGL").
The boards of Rockhopper and FOGL believe that a combination of the Rockhopper
and FOGL Groups (together, the "Combined Group") represents a significant
value opportunity arising from the combination of their highly complementary
portfolios. Specifically, the Combined Group is expected to:
· be the largest North Falkland Basin licence and discovered
resource holder with a material working interest in all key licences;
· have enhanced prospects of progressing the Sea Lion project
through final investment decision;
· have greater exposure to exploration and appraisal upside
potential; and
· benefit from enhanced scale and capabilities creating value in
the current market environment.
Under the terms of the agreement announced on 24 November 2015, shareholders
of FOGL received 0.2993 shares of the company per FOGL share.
The transaction has been accounted for by the purchase method of accounting
with an effective date of 18 January 2016 being the date on which the group
gained control of FOGL. Information in respect of the assets and liabilities
acquired and the fair value allocation to the FOGL assets in accordance with
the provisions of "IFRS3 - Business Combinations" has been determined on a
provisional basis, and is as follows:
Recognised values on acquisition
$'000
Intangible exploration and appraisal assets 216,000
Property, plant and equipment 58
Inventories 162
Trade and other receivables 3,231
Trade and other payables (20,422)
Net identifiable assets and liabilities 199,029
Fair value in excess of consideration (138,842)
Satisfied by:
Equity instruments 159,684,668 ordinary shares 65,499
Less cash acquired (5,312)
Total consideration 60,187
All of the recognised values have been finalised with the exception of those
relating to the intangible exploration and appraisal assets. The fair value of
intangible exploration and appraisal assets are inherently subjective and a
difficult exercise to determine. The work to determine the fair value is still
ongoing and pending further information and as such has been measured on a
provisional basis at 30 June 2016. All necessary information is expected to be
received by 31 December 2016 in order to finalise the fair value within the
annual report and financial statements for the year then ended.
The fair value of equity instruments has been determined by reference to the
closing share price on the trading day immediately prior to the completion of
the acquisition.
The fair value in excess of consideration arises due to the difference between
the fair value of the net assets and the consideration transferred and relates
to the fact that the financial position of FOGL had deteriorated due to cost
overruns at the Humpback exploration well as well as merger terms being agreed
prior to the Isobel Elaine well results, which substantially de-risked the
Isobel-Elaine complex.
Acquisition costs of $1,430,000 arose as a result of the transaction in this
and the prior period. These have been recognised as part of administrative
expenses in the statement of comprehensive income.
Since the acquisition date, FOGL has contributed $nil to group revenues and
added $873,000 to the group loss. If the acquisition had occurred on 31
December 2015, group revenues and group profit for the period would be
materially the same.
10 Post balance sheet events
Acquisition of Beach Egypt Pty Limited
In August 2016 Rockhopper completed the acquisition of the entire issued share
capital of Beach Egypt Pty Limited ("BEPL") in exchange for cash consideration
of $11.9 million based on cash flow effective date of 1 January 2016. BEPL
holds a 22% interest in the Abu Sennan concession and a 25% interest in the El
Qa'a Plain concession.
INDEPENDENT REVIEW REPORT TO ROCKHOPPER EXPLORATION PLC
Introduction
We have been engaged by the company to review the condensed set of financial
statements in the half-yearly report for the six months ended 30 June 2016
which comprises group income statement, the group statement of comprehensive
income, the group balance sheet, the group statement of changes in equity, the
group cash flow statement and the related explanatory notes. We have read the
other information contained in the half-yearly report and considered whether
it contains any apparent misstatements or material inconsistencies with the
information in the condensed set of financial statements.
This report is made solely to the company in accordance with the terms of our
engagement. Our review has been undertaken so that we might state to the
company those matters we are required to state to it in this report and for no
other purpose. To the fullest extent permitted by law, we do not accept or
assume responsibility to anyone other than the company for our review work,
for this report, or for the conclusions we have reached.
Directors' responsibilities
The half-yearly report is the responsibility of, and has been approved by, the
directors. The directors are responsible for preparing the half-yearly report
in accordance with the AIM Rules.
As disclosed in note 1, the annual financial statements of the group are
prepared in accordance with IFRSs as adopted by the EU. The condensed set of
financial statements included in this half-yearly report has been prepared in
accordance with IAS 34 Interim Financial Reporting as adopted by the EU.
Our responsibility
Our responsibility is to express to the company a conclusion on the condensed
set of financial statements in the half-yearly report based on our review.
Scope of review
We conducted our review in accordance with International Standard on Review
Engagements (UK and Ireland) 2410 Review of Interim Financial Information
Performed by the Independent Auditor of the Entity issued by the Auditing
Practices Board for use in the UK. A review of interim financial information
consists of making enquiries, primarily of persons responsible for financial
and accounting matters, and applying analytical and other review procedures.
A review is substantially less in scope than an audit conducted in accordance
with International Standards on Auditing (UK and Ireland) and consequently
does not enable us to obtain assurance that we would become aware of all
significant matters that might be identified in an audit. Accordingly, we do
not express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that causes us to
believe that the condensed set of financial statements in the half-yearly
report for the six months ended 30 June 2016 is not prepared, in all material
respects, in accordance with IAS 34 as adopted by the EU and the AIM Rules.
LYNTON RICHMOND
for and on behalf of KPMG LLP
Chartered Accountants
15 Canada Square
London
E14 5GL
14 September 2016
This information is provided by RNS
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